Janet Yellen Selected As New Fed Chair (2013-14): Would Larry Summers Be A Good Choice For The Next Chairman Of The Federal Reserve?

(This is an ideological question.  And a loaded question. But I will try to do it justice anyway.)

Summers is a ‘status quo’ economist with personal relationship with both the president and prominent wall street Democrats.  He is unobjectionable to conservatives since he has said impolitic but true things at times that they agree with. The consensus is that he will not put the country at risk or in painfully controversial debate.

So he is a capable, mainstream, status-quo economist, with personal relationships with important and powerful people that is politically acceptable to the other side.   And, as such, he will not add volatility to the markets or the political sector, and that is probably a good thing for the people making the decision.

If you were a mainstream economist facing the possibility of the euro shock, and having a deep understanding of the possibly permanent condition of the US economy, then I would suspect that you would argue that the Fed should take independent action to stimulate the economy even further and to encourage congress to spend like crazy.   But Larry Summers won’t do that.

If you were a partisan left wing economist like you would be torn since you’d rather have the spending. If you were a democratic leader you want to make sure you keep the white house so you probably want someone who doesn’t create trouble.

This is probably a fairly accurate answer to the question.


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